1. Understanding Trade and Environment issues
Alan Oxley
Australian APEC Centre
International Trade Strategies
May 2002

2. The presentation The debate The international framework The interface
Approaches

3. The Trade and Environment Debate
The Doha WTO mandate
The WTO Shrimp Turtle Decision
The debate
The issues

4. The WTO Doha Mandate
Environment now a mainstream negotiating issue in the WTO - for the first time
An EU initiative (demand)
This give the EU leverage
Essential we understand the implications

5. The WTO Shrimp/Turtle Decision
WTO Appellate Body ruled that the US may restrict imports of shrimp from four countries because they do not apply conservation policies to protect migratory turtles
The WTO has approved unilateral trade sanctions to enforce environmental standards
A shock result – WTO does not permit unilateral sanctions
Implications are unclear

6. The debate
EU and European environmental groups want new rights to restrict trade to protect the environment.
The US wants to right to ban imports unilaterally
Most countries are opposed

7. EU environment goals
To apply the following environment policies: to use “The precautionary principle” when regulating the environment
- to use “whole of life cycle” management to regulate the environment to use ecolabels to certify whole of lifecycle management

8. What does EU want in trade?
To use trade sanctions to secure adoption of environment principles
To exempt use of trade restrictions based on the precautionary principle from scientific challenge.
To be able to restrict trade on the basis of the environmental impacts of how products are made or processed.
To be able to protect EU agricultural producers from cheap exports on environmental grounds.

9. US interests To protect right to use unilateral sanctions
(Under the Clinton Administration) to include environment in trade agreements – NAFTA and Jordan FTA. (not Bush Administration policy, but strong support for linkage among Democrats in the Congress )
To protect science based controls on trade.

10. The issues Respect for national sovereignty
Effective environment policy
Effective trade policy
The balance of benefits

11. The International framework
The World Trade Organization
The United Nations

12. The WTO The basic activities The WTO Agreements
Basic principles of the WTO
How WTO provides economic benefit

13. The Basic activities Create rules to govern trade
Reduce barriers to trade

14. The WTO Agreements
Before 1994 (end of the Uruguay Round) - the GATT - a handful of minor agreements
After GATT, GATS, TRIPs - eleven other agreements - a revised disputes system - a new organization

15. Economic principles of GATT
Promote exchange of goods
Reflect comparative advantage export what you produce best, import what others produce best
GATT prevents discrimination it curbs the powerful

16. GATT establishes rights in international law
The WTO rules are enforceable
GATT protects the right to exploit comparative advantage
GATT protects right to develop

17. WTO and developing countries
WTO is the only international system which can increase trade and raise living standards in developing countries
Until 1994, Industrialized countries denied developing countries their full benefits:
- they restricted trade in garment, textiles and agriculture
Final barriers are progressively being reduced
Concern that US and EU will seek new rights to restrict trade

18. WTO gives members wide discretion to protect the environment
Article XX exemptions are wide - WTO rules can be waived to protect human, animal and plant health and safety
Some conditions: - rights are not be abused for economic reasons, - sound science must underpin trade controls

19. The United Nations Creates a mechanism for global security
Fosters collaboration on global problems
Promotes and brings into effect global treaties
Hosts most environmental treaties

20. Environment in the UN
UNCED is the Supreme body - the UN Conference on Environment and Development (UNCED – a special session of the UN General Assembly
UNEP (United Nations Environment Program) a program of ECOSOC - UNEP’s program is limited only to action taken by UN members - key activity is to support several international
environment agreements

21. UNCED
Adopted Agenda 21
Endorsed three conventions: - climate change - biodiversity - desertification
Adopted trade and environment principles
Established the UN Commission on Sustainable Development to oversee Agenda 21

22. MEA’s supported by the UN -1
CITES (banning trade in endangered species
Basle (banning trade in hazardous waste)
Montreal/Vienna (to protect the Ozone layer)
Cartegena Protocol (restricting trade in certain GMOs)

23. MEA’s supported by the UN -2
PIC – convention on prior informed consent on trade in chemical
POPs – convention banning trade in persistent organic pollutants
Kyoto Protocol - limiting greenhouse gases ALL BUT KYOTO HAVE TRADE PROVISIONS

24. Convention banning trade in endangered species
Lists species endangered and at risk
Obliges parties not to trade in the products covered with non-parties [Trade bans conflict with WTO]

25. Basel Convention banning trade in hazardous materials
Defines certain products as hazardous
Obliges parties to prohibit exports in those products unless the exporting government is satisfied that environmental management in the importing country is satisfactory
Oblige parties to ban trade with non-parties
A Protocol obliges parties to ban imports from OECD countries [Trade bans conflict with WTO]

26. Vienna Convention/Montreal Protocol on Chlorofluorocarbons
Bans production and consumption of designated chemicals deemed harmful to the Ozone Layer
Requires parties to ban trade with non-parties [Trade bans conflict with WTO]

27. Cartegena Protocol
Establishes global notification point for advice on release of Living Modified Organisms (LMOs)
Obliges some exporters to secure prior consent to importers to trade
Permits parties to ban imports of LMOs
Obliges parties to trade with non-parties on terms comparable to trade with parties [Trade bans conflict with WTO]

28. Agreement on Prior informed consent
Obliges parties to secure consent of importers before exporting designated chemical products [No conflict with WTO]

29. Convention banning Persistent Organic Pollutants (Rotterdam)
Bans listed chemicals
Obliges parties not to export prohibited products to non-parties [Trade bans conflict with WTO]

30. Comparing Cartegena and WTO import regimes
Restrictions are to contribute to obviating adverse effects on biodiversity *
Legal right to impose restrictions without scientific justification **
Exporter have right to request review of import controls - no recourse to independent arbitration
SPS
Restrictions are to protect human, animal and plant life and health
Restrictions based on
- international standards,or - science and risk assessment
Exporters have right to contest controls in WTO disputes systems - non-complying measures must be removed

31. Conflict and confusion
WTO does not permit discrimination in trade or use of trade sanctions
Several MEAs create discrimination and use trade sanctions
Countries oppose one thing in the WTO and support it in the UN

32. The interface MEAs and the WTO The precautionary principle
Ecolabelling

33. MEAs and the WTO
The debate is about what should be done in the WTO – amend it permit trade sanctions in MEAs? - this is what the EU wants from the Doha Round NOTE: Why is this question only asked about WTO rules?

34. The precautionary principle
Employ “no risk” strategies to protect the environment rather than managed risk strategies Why? So political judgements can be made in favour of environmental arguments
Impact on trade? Compare the terms of decision-making in the WTO with the Cartegena Protocol

35. Article XX of the GATT
Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures:
((b) (b) necessary to protect human, animal or plant life or health;

36. The Objective of the Cartegena Protocol (Article 1) lays down the criteria for taking decisions to restrict imports:
“to contribute to ensuring an adequate level of protection in the field of the safe transfer, handling and use of living modified organisms resulting from biotechnology that may have adverse effects on the conservation and sustainable use biological diversity, taking into account risks to human health and specifically focussing on transboundary movements”

37. Ecolabelling
The Ecolabel certifies that products meet “whole of lifecycle” environmental impacts
The product must be made in a way that meets every environmental standard set in the importing economy.
If not, its imports is banned. The importer sets the standard

38. What are the positions of industrialised economies on these issues?

39. Issue
Unilateral measures to protect the environment EU
Opposed US
Not opposed: defends own measures vigorously
Canada
Switzerland
Australia
New Zealand

40. Issue
Legitimize discriminatory trade measures in MEAs EU
Wants WTO rules “Clarified”to protect measures from challenge US
Opposed: existing provisions in WTO sufficient
Canada
Generally opposed, favours “clarification”
Switzerland
Generally supports legitimization
Australia
Opposed, WTO rules adequate
New Zealand
Limited support

41. Issue
Restrict trade on product and processing grounds (ppms) EU
Wants WTO rules “clarified”to allow whole of life cycle regulation US
Canada
Want issue examined.
Switzerland
Same position as EU
Australia
Opposed
New Zealand

42. Enacting the Precautionary Principle
Issue
Enacting the Precautionary Principle
EU*
Favours WTO applying version favoured by EU and in Cartagena US
Opposed: support SPS science based measures
Canada
Same as US
Switzerland
Australia
New Zealand
* Position qualified after Doha

43. Issue
Ecolabelling EU
Legitimize labels verifying compliance with whole of lifecycle management US
Supports transparency, opposes whole of life cycle ecolabelling
Canada
Supports voluntary whole of life cycle ecolabelling
Switzerland
Wants clarification of WTO rules
Australia
New Zealand

44. Issue
Subsidies with environmental impacts EU
Examine trade distorting subsidies in energy US
Eliminate fishing subsidies, allow subsidies to address environment issues
Canada
Address distorting impact in fisheries and forests
Switzerland
Wants clarification of WTO rules
Australia
Eliminate export subsidies
New Zealand
Eliminate export & fish subsidies

45. Issue
Environmental impact assessments of trade agreements EU US
Support
Canada
Switzerland
Australia
New Zealand

46. Are the MEA’s good environment policy?

47. Most of the MEA’s breach UNCED principles
The trade and environment principles adopted at UNCED urged - respect for national sovereignty - avoidance of use of trade sanctions - members of the UN to enter collaborative international agreements to provide global solutions instead of using trade coercion

48. Studies show poor environmental value of the trade measures in MEAs
UNCTAD and the OECD have both made studies of the environmental value of the trade measures in the MEAs and assessed it as low
Many private studies show trade measures are generally ineffective to protect the environment

49. Review the issue
The problem? – conflicting rules The source? - new rules in MEAs Are they desirable rules? If the rules are not desirable, why change the WTO?

50. The new rules in the MEAs
Use trade coercion to secure objectives
Allow trade to be restricted according to how a product is made or handled (PPM)
NOTE: it is not the norm in international treaties to impose conditions on non-parties

51. Who wants the new rules. The EU The UNEP Secretariat Who doesn’t
Who wants the new rules? The EU The UNEP Secretariat Who doesn’t? UNCED – trade and environment principles
UNCTAD – assessment of MEAs
OECD – assessment of MEAs
Most members of the WTO

52. What is wrong with the new rules?
1 Trade coercion is the rule of the jungle
2 Restricting trade by how a product is made: - undermines the capacity of the WTO to provide benefits forces first world environment standards on everyone
3. Why not use instead purpose-made conventions where countries adopt common measures into national law?

53. Approaches

54. The basic, global problem
Lack of common understanding
Lack of effective communication
Weak policy processes

55. Methodical approaches are required
What is the environmental problem?
What is the best way to address it?
Does trade impede the solution?
What trade controls currently exist?
Is the problem a “trade and environment” problem?

56. The issue is no longer just conflict between WTO and MEA provisions
The issue is restoring respect for national sovereignty and ruling out trade coercion in both the WTO and the UN environmental fora.
The Problem is not in the WTO it is poor environment policy in the UN.
This problem cannot be fixed by trade officials alone

57. Action to solve the problem
Clear positions are required by governments on each of the following issues: - sovereignty
- discrimination
- coercion - leverage
- precautionary principle
- production & process methods/ecolabelling
- sound principles in trade policy - sound principles in environment policy
The fundamental principles of good international governance need to be restated

58. Action to solve the problem
Specific outcomes must be secured: 1. Achieve domestic coherence on trade and environment policies 2. Re-align environment work in the UN with fundamental UN principles - cease including ineffective and inappropriate provisions in environment agreements 3. Protect fundamental provisions in the WTO